The U.S. dollar's bull run has been a headwind for Asian currencies in recent months, but one outlier is swimming against the tide: the Chinese yuan.
The yuan, which is still tightly controlled by the Chinese central bank, rose 1 percent against the U.S .dollar over the past three months. By contrast, the South Korean won, Indonesian rupiah and Indian rupee declined 6.2, 4.8 and 2.7 percent against the dollar, respectively.
"The CNY has proven to be a safe haven in an environment of a strong USD and it will continue to perform this role," Darius Kowalczyk, senior economist and strategist, Asia ex-Japan at Credit Agricole wrote in a note on Thursday.
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What's driving the currency?
There are three factors supporting yuan: record trade surpluses, surging foreign demand for onshore financial assets amid a gradual capital account opening and demand for currency as a store of value and medium of payment, according to Credit Agricole.
"The main reason for our bullish view on the CNY is China's trade in goods surplus, which in the summer rebounded strongly after slumping in the winter and during the start of spring," Kowalczyk said.
China's trade surplus is expected to hit a record $377 billion this year, with the second-half accounting for $274 billion or 73 percent, according to Credit Agricole.